Question

although appealing to more refined tastes, art as a collectible has not always performed so profitably. assume that in 2015, an auction house sold a statute at auction for a price of $10,479,500. unfortunately for the previous owner, he had purchased it in 2011 at a price of $12,929,500. what was his annual rate of return on this sculpture

Answer 1

-5.12%

Step-by-step explanation:

The annual rate of return can be determined using the future value formula given below:

FV=PV*(1+r)^n

FV is the value of the sculpture in 2015 which is $10,479,500.

PV is the original value of $12,929,500.

n is the number of years the sculpture was owned which is 4 years

r is the unknown

10,479,500=12,929,500*(1+r)^4

10,479,500/12,929,500=(1+r)^4

0.810510847 =(1+r)^4

divide the index on both sides by 4

(0.810510847 )^(1/4)=1+r

0.948832841 =1+r

r=0.948832841 -1

r=-5.12%